Why foreign company should undertake policy and regulatory research before entering Vietnam market?

Currently, with Vietnam’s investment attraction policies, annual foreign direct investment (FDI) into Vietnam is constantly increasing, after Covid time. According to the report on foreign direct investment in nine months of 2021 of the Ministry of Planning and Investment, as of September 20th, 2021, the total newly registered capital, adjusted and contributed capital to buy shares, purchase capital contribution (GVMCP) of foreign investors reached 22.15 billion USD, up 4.4% over the same period last year 2020. Realized capital of foreign investment projects is estimated at 13.28 billion USD, down 3.5% over the same period in 2020.

However, when entering a new market, especially the business environment of a developing country like Vietnam, foreign company always have to be cautious and should undertake research investment environment and target company for M&A, or business cooperation carefully. Besides socio-cultural factors, the differences in political and legal factors are important issues. In particular, it is really necessary to study policies and legal regulations before investing in order to mitigate risks when operating in the Vietnam market.

Each country has its own policies and independent legal system to manage domestic company as well as foreign company. Therefore, when foreign investors wish to invest in Vietnam, they need to learn about legal policies that affect their expected business activities. Specifically, through the study of laws, economic policies… investors will identify constraints as well as incentives for their expected type of investment. Foreign investors will have more proactive preparation steps and have a basis to consider the benefits and potential risks when making an investment in Vietnam.

Firstly, on the legal system related to investment activities, Vietnam has a fairly complete but complex regulatory legal system. Due to too many types of legal documents being issued, overlapping, inconsistent and inconsistent jurisdictions are quite difficult obstacles for foreign investors when penetrating the Vietnamese market. Therefore, studying the regulatory is necessary and really a big challenge for foreign investors.

Specifically, for the investment, Vietnam law only allows foreign investors to do business in a number of industries that satisfy market access conditions. Therefore, foreign investors need to learn specific regulations on conditions of establishment, capital contribution, capital contribution ratio, etc. to have a plan to prepare capital, and to choose the type of investment in accordance with the regulations of Vietnam law and expected investment scale.

In addition, foreign investors also need to learn about the regulations on the organization of different types of businesses in Vietnam. It will be the basis for foreign investors to determine the level of capital contribution, rights and obligations when participating in investment. From there, foreign investors will have reasonable considerations and considerations in line with the investment plan, avoiding passive situations or the establishment and capital contribution not achieving the set goals before investing.

Second, about policies for foreign investors, investors need to study policies related to tax i.e. corporate income tax rates, tax rates for personal income taxes, and policies. avoid double taxation between Vietnam and other countries in order to comply with tax obligations and ensure its interests in the process of conducting investment in Vietnam.

Furthermore, to ensure cash flow transactions, foreign investors need to have an understanding of Vietnam’s foreign exchange policy. Understanding the bank’s foreign currency buying and selling policies will help foreign investors flexible in implementing project activities. Policies and regulatory understanding in international bidding or bidding or goods or service supply service for state owned company are also matter of concern. Labor policy is also an information that foreign investors need to know to ensure that the recruitment and payment of salaries and benefits are consistent with the policies of the state. Economic and financial policies are regulated by the State in each period such as policy on funding or lending capital, tax policy of the State, economic policy on foreign relations, foreign policy.

Policies, laws and politics have a great influence on investment activities in Vietnam. Through legislation, the state institutionalizes economic undertakings and policies into law, with provisions that are universally binding for all business activities. The legal regulations and policies related to foreign investors in Vietnam are very complicated and changing over different periods. Therefore, before investing in Vietnam, investors need to learn, check the information and the authenticity of the information collected to ensure the authenticity and validity of those regulations and policies.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

Read More

Criminal Record Granting for Foreigner

In order to be granted the work permit for foreigner, completing the immigration or reside procedures in a country, foreigners who are or have been residing in Vietnam must apply for a criminal record for the time that they residing in Vietnam.

Foreigners who are or have been temporarily residing in Vietnam have the right to request the Department of Justice of the province or city where they are residing or the National Centre for Criminal Record to issue the criminal record, in order to confirm that people have or do not have criminal records while residing in Vietnam. The person requesting for criminal record card can authorize another person on their behalf to complete procedures to obtain the criminal record.

ANT Lawyers can assist clients to apply for: Criminal record card no 1 and Criminal record card no 2

Individual when requesting for criminal record issuance have to provide the following documents:

1.For Vietnamese:

– A written declaration requesting for the issuance of criminal record;

– Certified copy of identity card, passport, family record book, temporary residence book, temporary residence card, permanent resident card in Vietnam (should present the original for comparison);

– Confirmation of permanent residence in Vietnam before leaving the country (applies to Vietnamese who are living in foreign countries).

2.For Foreigner:

– A written declaration requesting for the issuance of criminal record;

– Copy of the passport and visa that are still valid;

– Confirmation of temporary residence in Vietnam.

Implementation time: 3-7 working days.

Read More

How To Conduct Legal Due Diligence for M&A in Vietnam?

Mergers and Acquisitions (M&A) has become popular in Vietnam as the country develops and more investors are eager to invest and gain control of the business enough to engage in, decide important business matters through partial or full ownership of an enterprise. A successful M&A mean the parties achieve their financial and commercial goals (increasing capital, raising management capacity, branding, etc) and ensuring safety and restraint the risk at the lowest level, though legal due diligence undertaken by law firms in Vietnam.

The Importance of Legal Due Diligence of Enterprise in M&A activities

Legal due diligence of enterprises focuses on full and detailed assessment of legal issues relating to the legal entity, capital contribution status, shareholder status, legal rights and obligations. From the investigation information, the parties can anticipate legal risks, assess opportunities to come up with alternatives. In addition, legal assessments help parties evaluate the reliability of their counterparts as well as understand their advantages and constraints for the negotiation process.

What Legal Due Diligence in M&A Activities Entail?

-Evaluate the factors related to the legal status and capacity of the target enterprise: Review the legitimacy of the establishment, operation, possession of enterprise; ensure that the enterprise is not subject to procedures for dissolution or bankruptcy and compliance with the law of the enterprise in the course of operation. The information to be checked includes: dossiers, certificate of enterprise establishment, operation licenses, practice certificates, professional liability insurance, company charter, agreement between the company owner on rights of shareholders, capital contributors, minutes of meetings, member/shareholder register, certificate of capital contribution.

-Evaluate the factors related to the business and financial activities of the target enterprise: Review the system of customers and partners of the enterprise; the documents on economic contracts (with customers, suppliers, etc); dossier of investment, construction, land, project; information on guarantee, mortgage (if any), debt and credit agreement, M&A, financial leasing contract, exclusive contract, franchise, etc, in terms of value, legality, validity, progress to evaluate legal risks in the future. Review the financial statements on the accuracy of the financial status of the business.

-Verify the factors related to labor: Review labor contracts, labor agreements, internal labor regulations to determine the enterprise’s financial obligations to employees, compliance Labor law and reception of labor after the purchase or sale.

-Verify the factors related to intellectual property: Review intellectual property rights of enterprises including: trademarks, trade names, industrial designs, layout designs, business secrets, etc; the property has granted the patent/license. Review matters of infringement of intellectual property rights of other organizations, individuals or legal persons in order to anticipate the risks of being sued or claiming damages.

In addition, in an M&A deal, the acquirer should ensure that participation in capital contribution or acquisition of the target enterprise is permitted, the form of M&A implementation is in accordance with the law and the M&A deal was approved by the competent authority of each party. After that, the factors related to M&A transaction procedures and constraints and restrictions of law (if any) must be evaluated.

Read More

Set up Branch Office in Vietnam

Foreign entity is allowed to set up branch office in Vietnam to conduct business activities according to the law.

The branch of a foreign business entity in Vietnam (referred as “The Branch”) means a subsidiary unit of the foreign business entity, established in accordance with the law of Vietnam in order to enter into contracts in Vietnam and conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

The Branch will need to apply and obtain the establishment license; and have a seal bearing the name of the Branch.

The Branch is permitted to conduct activities being the purchase and sale of goods and other commercial activities consistent with its license for establishment in accordance with the law of Vietnam and any international treaty to which the Socialist Republic of Vietnam is a member.

It should be noted that the liability of the Branch is the liability of the foreign entity. The business activity of the Branch has to be consistent with the business activity of the foreign entity. The Branch has to has office address.

Therefore the investor should consider its investment strategy when setting up its Branch in Vietnam.

Read More

Guidance of Representative Office Setting-up in Vietnam

The establishment of representative offices of foreign traders in Vietnam have to follow the procedures as guided by the Commercial Law in Vietnam and the related decrees providing instructions of the law.

Preparation of dossiers for establishment of representative offices includes:

-An application form for License for Establishment of the representative office using the form promulgated by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader.

Copies of the Certificate of Business Registration or equivalent documents of the foreign trader (shall be certified or legalized by overseas diplomatic missions or Consulates of Vietnam under laws of Vietnam);

A letter of appointment of the head of the representative office (shall be translated into Vietnamese and certified true in accordance with laws of Vietnam);

-Copies of audited financial statements or certificates of fulfillment of tax liabilities or financial obligations of the last fiscal year or equivalent documents as proof of existence and operation of the foreign trader issued or certified by competent authorities where such foreign trader is established (shall be translated into Vietnamese and certified true in accordance with laws of Vietnam);

-Copies of the passport or ID card (for Vietnamese) or copies of the passport (for foreigners) of the head of the representative office (shall be translated into Vietnamese and certified true in accordance with laws of Vietnam.);

-Documents on the expected location of the representative office including:

Copies of memorandum of understanding or leasing agreements or documents as proof of the right to use a location as the representative office;

Copies of documents on the expected location of the representative office.

Procedures for granting of Licenses for Establishment of representative offices:

-Foreign traders submit applications directly or via post or online (if applicable) to the Department of Industry and Trade of the locality where the representative office is to be located.

-Within 03 working days from the date of receipt of the dossier, the Department of Industry and Trade shall examine and request the supplement if the dossier is incomplete and invalid. Requests for additional records are made at most once during the processing of applications.

-Except for the establishment of a representative office have to submit for directions of the relevant Ministry of Industry, within 07 working days from the date of receipt of a complete and valid application the Department of Industry and Trade shall grant or refuse to grant a license for establish a representative office for foreign trader. In case of refusal, the reasons must be clearly stated in writing.

-Where the establishment of a Representative Office is subject to the approval of the relevant Minister or the Head of the ministerial level agency and the establishment of a Representative Office not yet stipulated in the normative document. The Department of Industry and Trade shall send a written request for directions to the specialized management ministry within 03 working days from the date of receipt of a complete and valid dossier. Within 05 working days from the date of receipt of the written request for the directions of the Department of Industry and Trade, the specialized management ministry shall issue a written statement stating its consent or refusal to grant a license for the establishment of the representative office. Within 5 working days after receiving the opinions of the specialized managing ministries, the provincial / municipal Industry and Trade Services shall grant or refuse to grant permits for the establishment of representative offices to foreign traders. In case of non-licensing, the reasons therefor must be clearly stated in writing.

In addition, for certain special cases managed by the specialized management ministry, the licensing of representative offices is carried out in accordance with the specific regulations.

Our lawyers in Vietnam constantly follow up with changes of law to provide the client with update for better decision making process.

Read More

How to Determine Penalty and Compensation for Damages from Breach of Commercial Contract?

When drafting a contract, especially a commercial business contract, in addition to basic provisions such as the object, scope of the contract, value and payment method, rights and obligations of the parties, dispute settlement, information confidentiality, and the regulations on the penalty for a breach of the contract and damage compensation are also very important.

Penalty for a breach of the contract

Under the provisions of the Commercial Law 2005, penalty for a breach means that the breaching party must pay a sum of money to the aggrieved party due to the breach of the violating party if the parties agree in the contract on the fine for a breach. Thus, the penalty for a breach only arises when there is a breach of the contract by the violating party and the parties have agreed on the penalty.

The law gives the right to agree on sanctions for violations to contractual parties, but this freedom to negotiate is limited. Specifically, the parties are only allowed to agree to a maximum penalty of 8% of the breached contractual obligation value, except traders providing assessment services issue assessment certificates showing incorrect results caused by their unintentional faults, they must pay penalty therefor to customers. The penalty level shall be agreed upon by the parties but must not exceed ten times the assessment service charge. In fact, the dispute settlement agency also bases on the prescribed limit of the law to handle; therefore, even if the parties agree to a higher penalty for a breach, it is not applicable in practice.

Compensation for damage

Compensation for damage means a remedy whereby the breaching party pays compensation for the loss caused by a contract-breaching act to the aggrieved party. The basis for arising damages is a breach of the contract; there is material loss and act of breaching the contract is the direct cause of the loss. Difference from penalty for a breach, liability to compensate for damages caused by breaches of contract performance obligations arises even in cases where the parties do not have an agreement on this matter. Besides, the law does not provide any regulation to limit the amount of compensation; it is based on the actual damages that the aggrieved party can prove.

When participating in the transaction, if both types of sanctions are specified in the contract, they should clearly specify the basis for the amount of compensation for the damages and the penalty for violation.

In fact, there are many cases where the parties do not agree clearly or agree on the penalty but the amount of the penalty exceeds the prescribed level, the excess could be considered invalid. The parties should also note that there will be no agreement on late payment interest on the infringement penalty and the amount of compensation damages.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Attorneys in Hanoi, Attorneys in Ho Chi Minh and Attorneys in Danang, will help customers conveniently drafting contracts and assist in resolving contract disputes

Read More

Buy Apartment in Vietnam

In the complicated situation of the Covid-19 epidemic, the Government continued to implement policies to restrict entry to Vietnam, thus many transactions were canceled or delayed. That has caused many obstacles for foreign individuals and organizations wishing to perform transactions in Vietnam. We refer to the transfer of home ownership for foreign individuals who cannot enter Vietnam to participate in signing transfer contracts and other related transactions i.e. sell or buy an apartment or a house located in Vietnam.

Pursuant to the law on housing, foreign organizations and individuals have the right to own house in Vietnam, before the time limit of the homeownership, the homeowner is entitled to gift or sell their house(s) to entities eligible for the homeownership in Vietnam; if not, their house(s) shall be under ownership of the State. Regarding the house ownership term, if a foreign organization or individual sells or gifted to a domestic organization, household, individual, or a Vietnamese citizen residing overseas, the buyer or recipient will acquire a long-term ownership of the house. If the house is sold to a foreign organization or individual eligible to own housing in Vietnam, the buyer or recipient may own the house for the remaining period. When this period expires, if the owner wishes to have this period extended, the State shall consider granting an extension. The seller or giver must pay tax and other amounts to state budget as prescribed by Vietnam’s law.

In accordance with the law on housing transactions, the seller or transferor of the commercial house sale and purchase contract must meet the following conditions:

-He/she is the homeowner, or the person permitted and authorized by the homeowner to enter into housing as prescribed in this Law and law on civil; if the agreement of commercial housing is transferred, he must be the buyer for housing of the investor or the transferee of the agreement on housing sale;

-If the entity is a person, he must have full civil capacity to enter into transactions in housing as prescribed in law on civil; if the entity is an organization, it must have legal personality.

Article 195 of the 2015 Civil Code stipulates: “A person who is not an owner of property has the right to dispose of property only under the authorization of the owner or according to the provisions of law.”

Clause 2 Article 55 of the Law on Notarization 2014 stipulates: “In case both the authorizing party and authorized party cannot appear together at the same notarial practice organization, the authorizing party shall request the notarial practice organization of the place of residence of the authorizing party to notarize the authorization contract; the authorized party shall request the notarial practice organization of the place of residence of the authorized party to further notarize the original of this authorization contract and complete procedures for notarization of the authorization contract.”

In order to perform the house purchase and sale transaction or in other words to buy a apartment or sell a house in Vietnam, the parties to the house transaction need to agree to make a sale contract or a document on the transfer of a commercial house sale and purchase contract. In case a foreign house owner cannot enter directly to sign a contract, he/she may authorize another individual or organization in Vietnam to perform instead. However, the authorization document needs to be notarized at the competent authority. In case a power of attorney is notarized at a competent agency in a foreign country, it is required to be notarized, legalized, and authenticated in accordance with regulations of the foreigner country (apostille) before that document can be used in Vietnam.

ANT Lawyers is a Law firms in Vietnam ​located in the business centers of Hanoi, Danang and Ho Chi Minh City. We provide convenient access to our clients. Please contact us to book your time in advanced to let us provide our best service.

Read More

Five types of real estate contracts abolished mandatory notarization procedure

According to the regulation of Civil Code 2015, some of the transactions which are required to implement the process of notarization and registration according to the regulation of the laws. As real estate transactions are normally at high value, the process of notarization and registration would help parties involved to be protected from falsified transactions.

As the stipulated in the Real estate trading 2014, the real estate trading agreement must be made in writing. The agreement notarizing or authenticating shall be discussed by contracting parties. However, the real estate trading agreement in which on building sale or lease purchase agreements or land transfer agreements concluded by households and individuals who conduct small-scale or irregular transactions of real estate sale, transfer, lease-out, and lease purchase shall not be required to set up enterprises, but they shall make tax declaration as prescribed need to be implemented the mandatory notarization procedure.

The procedure and dossier for notarization the real estate agreement will be implement according to the regulations of Law on notarization 2014.

Our real estate lawyers in Vietnam recommend client to have house leasing contracts voluntarily notarized to better protect their interests in disputes or any future issues.

For more information or legal advice in real estate transactions, we are glad to assist. ANT Lawyers, your lawyers in Vietnam

Read More

What Are Regulations on Debt Trading Contracts in Vietnam?

Along with the development of socio-economic activities, right to collect debt has become an asset right, hence its transferability is also recognized. Vietnam law recognizes debt as a commodity that can be traded through a debt trading contract. However, in order for the debt trading contract to be legally valid and ensure the rights and obligations are enforced, the parties need to pay attention to the provisions on the debt trading contract.

Firstly, in terms of the right to enter into a debt trading contract, according to the provisions of the Civil Code on the sale and purchase of property rights, the property right is the right to claim debt in Vietnam. Accordingly, the right to recover debt becomes the subject of a contract that the parties can transfer as if it were a special type of property. In addition, the debt trading contract aims to transfer ownership of the right of debt recovery and at the same time transfer the debt seller’s obligations to the debt purchaser. This is a transaction that does not affect the interests of the debtor totally. Therefore, the transfer of the right to demand does not require the consent of the obligor, whereby the parties can enter into a debt trading contract without the consent of the debtor.

Secondly, in terms of the form of the debt trading contract, based on the provisions of law prescribing debt trading contract by credit institutions and foreign bank branches, debt trading contract is a written agreement on the transfer of the right to collect debt for a debt arising from a lending operation, payment on behalf of the guarantee, whereby the debt seller transfers ownership of the debt to the debt purchaser and receives payment from the debt purchaser. Therefore, the debt trading contract must be made as a written document.

Furthermore, the debt trading contract must be signed by the legal representative or the authorized representative of the debt purchase and sale parties. Therefore, according to this provision, the debt trading contract does not require the parties to be notarized or authenticated. If necessary, the parties can agree on the notarization or authentication of the debt trading contract. In addition, the parties can make an agreement that the contract can be made in a foreign language and the parties need to consent on which language of the contract will be used in case of a dispute arisen. In addition, in case the debt purchaser and debt seller are organizations with legal status, in addition to the legal representative to sign, the contract needs to be stamped. These are strict regulations on the established form to ensure the legality of the contract’s form.

Thirdly, when drafting a debt trading contract, it must contains the following principal contents: (i) Time for signing the debt trading contract; (ii) Names and addresses of the parties to the debt trading contract; (iii) Name and title of the representative of the parties to the debt trading contract; (iv) Name and address of the debtor and related parties (if any) to the purchased or sold debt; (v) Details of debt purchased and sold: Loan amount, loan period, purpose, book value of the debt up to the time of debt purchase and sale; (vi) Security measures for the debtor’s payment obligation for the purchased or sold debt (if any); (vii) Debt selling price, payment method, payment term; (viii) Time, method and procedures for transferring debt documents and records, including dossiers and documents on debt security (if any); The time the debt purchaser becomes the subrogator, the debt seller has obligations; (ix) Rights and obligations of debt sellers and debt buyers; (x) Liability of the parties for breach of contract; (xi) Settlement of arising disputes. These are the basic and mandatory contents of a debt trading contract. In addition, the parties can make agree on other contents in the debt trading contract that are not contrary to the provisions of the laws.

In addition, during the implementation of the debt trading contract, the law allows the parties to agree to amend, supplement or cancel the content of the debt trading contract. However, the decision to amend, supplement or cancel must be based on ensuring compliance with the provisions of law.

Therefore, the establishment of a debt trading contract in Vietnam is basically the same as other property rights transfer transactions. However, debt is a special object of property rights, therefore the parties need to strictly comply with the provisions of law on the content and form of the contract to ensure the legality of the contract as well as the rights and obligations of the parties. It is suggested to engage lawyers with specialization in debt recovery and dispute resolution to assist drafting or reviewing debt trading contract for its effective usage.

Read More

Sport Betting in Vietnam

Law on amendments to Physical Training and Sports No. 26/2018/QH14 is in valid as of February 1st, 2019. The highlight that must be noted is sports betting as provided in Article 67a. This activity is officially governed by laws. Sports betting is a form of entertainment with rewards in which bettors predict the results of sporting events used for betting purpose.

The sports betting has a long history, but it had not been recognized by the State for a long time. Therefore, the betting was considered a violation of laws and was liable to administrative and criminal remedies. Before sports betting is restricted and just allowed to bet on horse racing, greyhound racing and pilot international soccer as specified in the Decree 06/2017/ND-CP effective from March 31st, 2017 on business of betting on horse racing, greyhound racing and international soccer. After the amendment law takes effect, the sports are allowed to bet will be extended according to the List of sports activities allowed to trade in betting issued by the Government.

What Conditions Required for Sports Betting?

Relating to condition of sports betting business in Vietnam, the enterprises need to be granted a certificate of eligibility for betting business. This is one of the conditional business lines under the strict management.

Regarding horse racing and greyhound racing, the enterprises need to obtain the Certificate of investment registration for the project for construction of horse and/or greyhound racecourses and the Certificate of eligibility for betting business. For horseracing, the charter capital requirement is VND 1 trillion ($44.2 million), while for greyhound racing it is VND 300 billion ($13.2 million). Locations of horse and/or greyhound racecourses are conformable to the socio-economic development planning of the area where such racecourses are located. Therefore, if the project attracts more than one investor, the investor for the project for the construction of horse racecourses and/or greyhound racecourses which covers the business of betting on horse racing and/or greyhound racing shall be selected through bidding process according to law.

Regarding international soccer, the procedures is similar to horse racing and greyhound racing. However, The Government allows one enterprise to pilot the business of betting on international soccer. The duration of pilot international soccer betting business shall be 05 years since the date on which the Certificate of eligibility for international soccer betting business is issued. After such period, the Government shall consider whether or not to continue the pilot international soccer betting business upon the assessment of the collected results. The list of international football matches and tournaments which are selected to provide the basis for the business of betting on international football is stipulated in the Decision No. 1064/QĐ-BVHTTDL issued by the Ministry of Culture, Sports and Tourism.

Which Authorities Will Approve the Sports Betting Activities?

The Ministry of Finance will publicize the conditions, dossiers, procedures for organizing bidding to select enterprises to pilot international football betting business according to the provisions of law. To be able to participate in bidding, the enterprises need to meet the following conditions:

(1) The minimum charter capital shall be VND 1 trillion ($44.2 million)or an equivalent amount;

(2) Having a plan on investment in the technological system, technical equipment and business software to ensure their accurate, safe and stable operation;

(3) There shall be a feasible plan on the business of betting on international soccer and ticket selling methods and locations;

(4) Committing to community assistance.

There are 135 countries in the world officially legalizing sports betting activities. Betting is increasingly on the rise, along with the development of information technology and entertainment. In Vietnam, sports betting is put under the strict management.

Read More

What Procedures an Enterprise Complies on Publishing Business Information?

Provisions on announcing of business information are stipulated in the Law on Enterprise and other decrees which company has to comply as part of compliance procedures.

After being granted an enterprise registration certificate, under the Enterprise Law, an enterprise must publicly announce it on the National Business Registration Portal according to the order, procedures and pay fees as required. The application for publication of enterprise registration information is a compulsory procedure, made at the time an enterprise submits its enterprise registration dossier. Information about publication of enterprise registration information is posted on the National Business Registration Portal. The content to be published includes the contents on the enterprise registration certificate and the lines of business. In addition, for joint stock companies with foreign investors, a list of founding shareholders and foreign investors is required. In case of changes in enterprise registration contents, the corresponding changes must be publicly announced on the National Business Registration Portal.

Provisions on form, time and content of announcement are different from those in the Law on Enterprise, specifically, within a period of thirty days from the date of being granted an enterprise registration certificate, an enterprise must publish information in one of the forms posted on the business information network of the business registration agency or one of the written or electronic newspapers in three consecutive issues. The main content to be published includes: Company’s name; Address of the head office of the enterprise, branch or representative office; Lines of business; Charter capital of limited liability company and partnership company; number of shares and value of contributed capital and number of shares to be issued with joint stock company; initial investment capital for private enterprises; legal capital for enterprises conducting lines of business requiring legal capital; Full name, address, nationality, ID card number, passport or other legal personal identification number, establishment decision number or business registration code of the owner, member or shareholder foundation; Full name, permanent address, nationality, ID card number, passport number or other legal personal identification of the legal representative of the enterprise; Place of business registration.

For publication fees, according to the provisions of Circular no. 47/2019/TT-BTC stipulating the rates, collection, payment, management and use of information provision charges of enterprise information that takes effect from the date of On September 20, 2019, the enterprise registration fee and the enterprise registration content announcement fee are VND 100,000/time, instead of the VND 300,000/time as stipulated in Circular no. 215/2016/TT-BTC regulating the rates, collection, remittance, management and use of charges for provision of enterprise information and enterprise registration fees.

In addition, there are some enterprises that do not need to publish their business information on the National Business Registration Portal before going into operation, but make other forms of announcement. For example, for a law-practicing organization, within thirty days after being granted operation registration papers, law-practicing organizations must publish on daily newspapers of central or local registry of law practice or newspaper for three consecutive issues. For credit institutions, foreign bank branches, representative offices of foreign credit institutions and other foreign institutions engaged in banking activities, they must be published on the State Bank’s media, and in a daily newspaper written in 03 consecutive issues or an electronic newspaper of Vietnam at least thirty days prior to the scheduled date of operation of opening information as prescribed in Article 25 of the Law on Credit Institutions 2010.

In addition to disclosing corporate information, there is also a procedure for disclosure of information on the stock market that is applicable to public companies and bond issuers (except for government bond issuers and bonds), government-guaranteed bonds and local government bonds), securities companies, fund management companies, branches of foreign fund management companies in Vietnam, public funds. These companies and organizations must comply with the law on securities in the Securities Law announcing on the company’s website and information disclosure system of the State Securities Commission.

Read More

How to Set Up Company in Hanoi?

The Law on investment 2021 has a lot of investment incentive policies in economic sectors in Vietnam for foreign investors.

Foreign investors that invest in Vietnam in general and Hanoi in particular for the first time must have investment projects and fill in investment registration or examination procedures at state agencies in charge of investment in order to be granted Investment Registration Certificates (“IRC”) and Enterprise Registration Certificate (“ERC”). Company with 100% foreign capital has founded and operated from the date of issuance of the investment certificate.

The investor who wishes to apply for IRC in Hanoi, s/he need to have a possible project which is accepted by the Government (The Department of Planning and Investment of Hanoi City). The dossier on applying for IRC

For Investment Registration Certificate, the investor must prepare the dossier included:

i) An application form for execution of the investment project, including a commitment to incur all costs and risks if the project is not approved;

ii) A document about the investor’s legal status;

iii) Document(s) proving the financial capacity of the investor including at least one of the following documents: the investor’s financial statements for the last two years; commitment of a parent company to provide financial support; commitment of a financial institution to provide financial support; guarantee for the investor’s financial capacity; other document proving the investor’s financial capacity;

iv) Proposal for the investment project including the following main contents: investor or method of investor selection, investment objectives, investment scale, investment capital and plan for raising capital, location, duration and schedule of the investment project, information about the current use of land in the location of the project and proposed demand for land use (if any), demand for labor, proposal for investment incentives, impact and socio – economic efficiency of the project and preliminary assessment of environmental impact (if any) in accordance with regulations of law on environmental protection.

If the law on construction requires formulation of a pre-feasibility study report, the investor is entitled to submit the pre-feasibility study report instead of a proposal for the investment project.

v) If the project does not require the State to allocate or lease out land or to permit land repurposing, a copy of the document regarding the land use rights or other document identifying the right to use the location for execution of the investment project is required to be submitted;

vi) Contents of the explanation for the technology to be used in the investment project if the project requires appraisal and collection of opinions on the technology in accordance with the Law on Technology Transfer;

vii) The business cooperation contract if the investment project is executed under a business cooperation contract;

viii) Other documents relating to the investment project, and requirements on the eligibility and capacity of the investor in accordance with regulations of law (if any).

After having the project, the investor needs to apply for Enterprise Registration Certificate, the dossier included:

i) An application for enterprise registration;

ii) The enterprise’s charter;

iii) A list of members of a limited liability company with two or more members or a list of general partners;

iv) A notarized copy of identity card or valid passport of individual member;

v) A notarized copy of the Enterprise Registration Certificate of the organization’s member;

vi) A notarized copy of valid identity card or passport of the organization’s legal representative;

vii) The copy of Investment Registration Certificate.

The time for applying the investment project is 15 working days and the time for applying the company is 03 working days after the date of submitting the valid dossier.

Read More

Process Setting-up Foreign Owned Import Export Business in Vietnam

If a foreign-invested company wishes to apply for export/import or distribution rights, it has to submit the below listed documentation to the competent authorities:

1. Export/Import rights:

The foreign investors who invest to exercise right to export, right to import must follow procedures for grant of investment certificates; the foreign-invested enterprises in Vietnam which supplement the operational business activities for exercise of right to export, right to import must follow procedures for adjustment of investment certificates:

a. Dossier of verification for grant or adjustment of investment certificate as prescribed by law on investment;

b. A written explanation about the satisfaction of conditions in exercise of goods trading and directly related activities;

c. Documents proving the financial capability and experiences of investor in exercise of right to export and right to import;

d. Vouchers of tax agencies on performing the enterprise income tax liability within two consecutive years in the case the foreign-invested enterprises wish to supplement the exercise of right to export, right to import.

2. Trading activities/Distribution

The foreign investors with investment projects on exercise of goods trading and directly related activities in association with the setting up of enterprises must follow procedures for grant of investment certificates.

a. A dossier comprises:

i) Dossier of verification for grant of investment certificate as prescribed by law on investment;

ii) A written explanation about the satisfaction of conditions in exercise of goods trading and directly related activities according to the form MD-6 promulgated together with this Circular;

iii) Documents proving the financial capability and experiences of investor in exercise of business operation of goods trading and directly related activities.

b. After having acceptance opinion of the Ministry of Industry and Trade, the competent state agencies shall grant investment certificate. The investment certificate shall concurrently be business license. Although not stipulated in the law, before granting an investment certificate with these business lines, the authorities usually consider application on case by case basis, taking into account market stability, population density in the area where the company is located and the consistency of the investment project with the master plan of the said area.

For these business lines the competent authorities must obtain the approval of the Ministry of Industry and Trade before issuing the investment certificate.

3. License for setting up retail establishments

If a foreign-invested enterprise wishes to set up a retail establishment in addition to the first retail establishment, it must follow procedures for license for setting up retail establishment, a dossier comprises:

a. Dossier of verification for grant or adjustment of investment certificate as prescribed by law on investment;

b. Dossier of license for setting up retail establishments, comprising:

i) Application for license to set up retail establishment;

ii) A written explanation about the satisfaction of conditions of setting retail establishments as per the law;

iii) Document of provincial People’s Committee that approves the working result of the Council of checking the

economic demand to consider the conformity of setting up of a retail establishment in addition to the first retail establishment.

iv) Report on exercise of goods trading and directly related activities of licensed projects;

v)Vouchers, which are issued by tax agencies, about exercise of enterprise income tax liability in two adjacent years.

After having acceptance of the Ministry of Industry and Trade, the competent state agency shall grant the license for the setting up of retail establishments.

Our lawyers of foreign investment practice at ANT Lawyers, a law firms in Vietnam are available to advise and provide client with service and representation in Vietnam.

Read More

Which Authority Approves Business Setting up in Vietnam?

Investment projects in Vietnam could be evaluated and approved for business setting up at top level of the government, at ministerial levels or at the provincial levels.

The licensing authorities for business setting up in Vietnam has been divided to distribute workloads at different state agencies with aim to speed up the process and attract more quality investment projects in Vietnam.

In practice, the process for establishing companies or executing investment projects in Vietnam would take from one month for simple project, three to six month for areas categorized under conditional investment areas, requiring sub-licenses, or additional time for more complicated projects. At the provincial levels, there might be inconsistency between cities and provinces due to different interpretation of laws. For investment project with difficulty to manage, the provincial levels would need to consult with technical department of central government agencies, as such the time taken to process the investment certificate would be lengthen.

Understanding the mechanism and the work division of Vietnam authorities that evaluate and approve business licensing at different government agencies would help foreign investors to smoothen the process and improve their experience in Vietnam.

It is notable that, the government level will be focusing on significant projects, in special area at large investment capital with impact on social economic situations. Most of the investment licensing procedures will be carried out at the provincial levels where the investment projects exist.

The following will point out directions for foreigners to approach respective agencies based on the particular area of interests, scale, and nature of the investment. However, to avoid delay and increase effectiveness, it is advisable that the foreign clients would consult with Vietnam law firms to help advise and represent them in preparing and executing the investment in Vietnam.

I. Projects evaluated and granted investment licensing at government level

Depending on the business nature, industry sector, investment scale, and investment policy, the Vietnam Prime Minister, on behalf of the government will evaluate and approve investment licensing for setting up business.

1. The investment project in Vietnam the government will evaluate and approve regardless of funding, the scale of investment are in the following areas:

a) Development and commercialization of airports and air transport;

b) Development and commercialization of national port;

c) Exploration, mining and processing of oil and gas; exploration and exploitation of minerals;

d) Radio, television;

e) Casino;

f) Production of cigarettes;

g) Establishment of university level educational institute;

h) Establishment of industrial zones, export processing zones, high-tech zones and economic zones.

2. Although investment projects which do not fall under the cases listed above, but the government of Vietnam also evaluates and approves investment project with investment capital of VND 1,500 billion (around USD 75 mil) upwards regardless of funding and in the following areas:

a) Sales of electricity, mineral processing, metallurgical;

b) Construction of railway infrastructure, roads, inland waterways;

c) Production, sales of wine and beer.

3. Further, the government of Vietnam also evaluates and approve investment projects with foreign investment in the following areas:

a) Maritime transport;

b) Establishment of networks and provision of postal services, courier, telecommunication and internet; network setup and signal transmission;

c) Printing and distribution of newspapers; publication;

d) Establishment of independent scientific research.

4. Where the investment projects specified in the above cases are in the plan which the Prime Minister has approved or authorized other agencies to approve, and that the investment projects meet the conditions prescribed by law and treaties to which Vietnam Nam is a member, the agency granted investment certificates perform the procedure for issuance of investment certificates is not required to submit to the Prime Minister to decide on the investment policy.

5. Where the investment projects specified in the above case is not in the plan which has been approved by the Vietnam Prime Minister or authorized other agency to approve, and that the projects do not meet the conditions for market access provisions in international treaties which Vietnam is a member, the agency granted investment certificates shall consult with other of relevant industries and submit to the Prime Minister for investment policy decision.

II. Projects evaluated and granted investment licensing at ministerial level

1. The Vietnam Ministry of Planning and Investment shall evaluate and approve licensing for investment projects in the form of BOT, BTO, BT.

2. Other ministries will be evaluating and granting license for investment in some sectors.

a.Vietnam Ministry of Commerce and Industry shall evaluate and approve licensing for investment project in oil and gas sector;

b. Vietnam State Bank shall grant licensing for financial institutions;

c. Vietnam Ministry of Finance shall be responsible for issuing license for investment project of insurance business.

III. Projects evaluated and granted investment licensing at provincial levels

1. Department of Planning and Investment shall be the single point of contact that receive the application and evaluate the investment plan of the foreign investors wishing to establish business in Vietnam for projects

a. Outside of Industrial Zone, Industrial Processing Zone;

b. Infrastructure development project for Industrial Zone, Industrial Processing Zone which management board of industrial zone and industrial processing zone are not yet established.

2. The management board of Industrial Zone, and Industrial Processing Zone:

a. For investment projects within the Industrial Zone, and Industrial Processing Zone which are not under the authority of the Prime Minister;

b. Infrastructure development project to for industrial zone and industrial processing zone.

Read More

How to Transfer Shares in a Joint Stock Company?

According to Vietnam law, joint stock company is one form of typical company types in Vietnam. For a joint stock company to be set-up, there should be at least three shareholders. In the joint stock company, the charter capital is divided into equal parts called shares. Shareholders have the right to freely transfer their shares to others, but there will be some certain restrictions.

Within three years from the establishment of the company and the issuance date of the Certificate of Enterprise Registration, the ordinary shares of founding shareholders may be transferred to other founding shareholders and may only be transferred to a person that is not a founding shareholder if the transfer is accepted by the General Meeting of Shareholders. In this case, the transferor does not have the right to vote on this transfer. In addition, if the company’s charter has provisions restricting the transfer of shares, the transfer of shareholders must also comply with the provisions of the Charter and these regulations will only applicable if they are written in the certificates of the shares subject to restriction.

The transfer of shares is usually made by the parties by contract or transaction on the securities market. In case of transfer under a contract, the documents shall bear the signatures of the transferor and the transferee or their authorized representatives. In case shares are transferred on the securities market, the transfer procedures prescribed by securities laws shall apply.

Shareholders of a joint-stock company have the right to donate part or all of their shares in the company to other individuals or organizations; use shares to pay off debt. At that time, individuals and organizations that are given or received the donation or debt payment will become a shareholder of the company. However, they will only become shareholders of the company from the time their information is fully recorded in the register of shareholders.

In case of the death of a shareholder that is an individual, his/her heir at law or designated by a will shall become a shareholder of the company. If such shareholder dies without an heir or the heir refuses the inheritance or is disinherited, his/her shares shall be settled in accordance with civil laws.

The last point to pay attention is when there is a share transfer event, the company shall register the changes of shareholders in the shareholder register as requested by relevant shareholders within 24 hours after the request is received.

Read More

Rights Shareholder Holds in Joint Stock Company

Shareholders are individual or organization that owns at least one share of the joint-stock company and also are owner of the joint-stock company. Along with these roles, their interests are tied to business operations although they may not directly manage the day-to-day company affairs. In order to implement governance, the powers and responsibilities of each interest group such as shareholders, the board of directors, managerial personnel, etc. should be assigned based on the statutory principles and procedures.

According to the regulations on shareholders in the Law on Enterprise 2020, the rights of shareholders can be categorized into the following groups: economic rights, governance rights, information rights, and litigation rights.

Economic rights

Economic right is the right to gain all pecuniary interest with respect to the shares. The purpose of starting a business or investing in securities comes mainly from earning income or gaining profits. Economic rights accordingly include:

-Right to entitlement to dividends

-Right to transfer ownership

-Priority right to acquire the newly issued shares

-Right to entitlement to a portion of the assets after dissolution or bankrupt

-Appraisal Right

Among these above rights, right to entitlement to dividends and right to transfer ownership are the fundamental economic rights of a shareholder.

Dividend of common shares is determined according to the realized net profit and the dividend payment from the company’s retained earnings. Despite right to entitlement to dividends, shareholders are still subject to a number of limitations in law and in fact. Dividend entitlement is determined by the General Meeting of Shareholders based on the recommendation of the Board of Directors, after the company has fulfilled tax obligations and other financial obligations, contributed to reserve fund, paid for previous losses and met the solvency for all due debts and other property obligations. Dividend is not required to be distributed annually. Depending on the business situation, the General Meeting of Shareholders may decide to retain profits for reinvestment.

Besides dividend entitlement from the company’s operating results, shareholders can also gain profits by share transfer. This kind of investment is popular with respect of shares or securities of public companies, investors do not aim for corporate governance rights as well as dividend, they intend to earn benefits by the difference of the market values of stocks, especially when the stock value increases.

Governance rights

Modern corporate governance has two principles, one is to separate ownership and governance and to separate governance and management. It means that the major shareholders should not hold senior managerial positions in the company and Chairperson of the Board of Directors should not be assigned to other senior managerial positions such as General Director and/or Director.

Shareholders may be an individual or organization which they have their own different interests, goals and abilities. The separation between ownership and management makes the situation of whom the owner is and how the share get transferred not to affect the business operation. In the meantime, the separation helps gather professional managers to implement target intended by the company. According to the laws, members of the Board of Directors of a public company concurrently holding several executive titles must be reduced to the minimum to ensure the independence of the Board of Directors, specially the Chairperson of the Board of Directors shall not be the Director/General Director in a public company as of August 1st, 2020. There are no similar rules applicable to joint stock companies which are not public company.

Attendance, speaking and voting at General Meeting of Shareholders are fundamental in governance right of common shareholders, applicable to all shareholders holding at least one share. ty. In principle, being a shareholder who holds shares of the company regardless of the number has equal rights to attend and vote at the General Meeting of Shareholders. By the General Meeting of Shareholders, the shareholders holding a certain number of shares can impact decisions on some matters such as election, dismissal, and removal of members of the Board of Directors and Controllers, amendment and supplementation of internal documents, major transactions, and others as stipulated in law on enterprise or charter. In addition to the above rights, the majority shareholders also have a number of other rights related to governance as follows:

The shareholder or group of shareholders holding at least 5% of the total number of common shares (charter may require a smaller percentage) is entitled to:

-Call a General Meeting of Shareholders

-Request Board of Controllers to inspect each specific matter relating to management, governance of company affairs if necessary

-Recommend matters to be included in agenda of General Meeting of Shareholders

-The shareholder or group of shareholders holding at least 10% of the total number of common shares (charter may require a smaller percentage) is entitled to nominate candidates for the Board of Directors, Board of Controllers

Information rights

Shareholders have the right to access documents and information of the company. In addition to the basic documents such as the charter, list of shareholders, meeting minutes and resolutions of the General Meeting of Shareholders, shareholders have the right to access to reports related to the business affairs.

However, some information is only reviewed by shareholders who own required percentage of share:

-Access and extract information on full name and contact address as specified in list of shareholders having voting right and list of shareholders having right to attend General Meeting of Shareholder; request to adjust his/her inaccurate information

-Access, extract and scan charter of company, meeting minutes of General Meeting of Shareholder and its resolution

-Access, extract and copy partial or whole list of involved persons and their contracts, transaction of which the company is other party, interests of Board of Directors, Controllers, Directors or General Directors and other managerial positions of company

-Access and extract minutes and resolutions of Board of Directors, annual or mid-year financial reports, reports of Board of Controllers, contracts and transaction approved by Board of Directors and other documents, excepting for documents related to company’s know-how and trade secrets (applicable to shareholder and group of shareholders who own at least 5% of total number of common shares, the charter may require a smaller percentage)

-Access profit and loss statements, financial reports, governance and management assessment reports; inspection reports of Board of Controllers (applicable to shareholder who own shares at least 1 consecutive year, the charter may require a smaller percentage)

Different to common joint stock company, a public company must announce fully, accurately and promptly the periodic and extraordinary information on business, finance and governance. Other information must be announced if it influences share price and investment decisions of shareholders and investors.

Litigation rights

The Law on Enterprises has provided a mechanism to request the Court or Arbitration to rescind the resolution of the General Meeting of Shareholders or sue the managerial personnels when they fail to fully and properly implement their tasks, including:

The shareholder or group of shareholders holding at least 5% of the total number of common shares (charter may require a smaller percentage) is entitled to:

-Request to rescind resolutions of the General Meeting of Shareholders when the orders and procedures of calling the meeting and making resolution of the General Meeting of Shareholders seriously violate the regulations of the Law on Enterprises and company’s charter

-However, the resolution of the General Meeting of Shareholders adopted by 100% of the total number of voting shares is legal and effective even when the orders and procedures of calling the meeting and adopting such resolution violates regulations of the Law on Enterprises and company’s charter.

-Request to rescind resolutions of the General Meeting of Shareholders when its provisions violates the laws or company’s charter

-The shareholder, group of shareholders holding at least 1% of the total number of common shares is entitled to:

-Sue members of Board of Directors, Directors, General Directors separately or jointly under certain circumstances

The Chairperson of Board of Directors or the Director or General Director usually acts as the legal representative of the company, representing the company to perform rights and obligations arising from the company’s transactions, representing the company to take proceedings before the court or arbitrator. However, when their interests conflict with those of the shareholders, shareholders have the right to initiate a lawsuit claiming benefits or compensation. The Law on Enterprise also permits shareholders to sue on behalf of the company when the above managerial personnels commit violations, causing damage directly to the company and indirectly to shareholders.

Not all shareholders have the right to sue for the above managerial personnels, only those who own at least 1% of the total number of common shares. This restriction makes sense with respect of public companies, in order to eliminate unfair competition actions conducted by minority shareholders who is controlled by the rival companies because amount of 1% in public company is not a small number.

Similar to a lawsuit against a manager, shareholder or group of shareholders is also required to own at least 5% of the total number of common shares to request rescission of the resolution of the General Meeting of Shareholders if there is violation on substantive law and procedural law. Accordingly, all resolutions of the General Meeting of Shareholders violating the substantive laws or the company’s charter are rescinded at the request of shareholders, but only serious procedural violations may be rescinded. There is no specific instructions for serious procedural violations at this time, the assessment will depend on personal perspective of the court and arbitrator.

Read More